For many years, payment systems existed as an afterthought for other ePayables (accounts payable automation) systems. That all changed in the last few years, with more and more AP-driven RFPs that began to treat payments as a critical piece of AP transformation. The early September introduction of Basware Pay, a joint venture between Basware (Helsinki: BAS1V) and MasterCard (NYSE: MA), is another step in this direction. (We previously wrote about Basware Pay in October 2013, shortly after the partnership announcement.)
Basware Pay, launched on the Basware Commerce Network (which recently passed 80 million transactions annually), is the new joint solution with MasterCard and one part of Basware’s three-pronged effort to enter the B2B payments space. The other two prongs are Basware Discount (a dynamic discounting solution) and Basware Factoring (a supply chain finance solution) which will be available in 2015.
We caught up with Basware’s CEO, Esa Tihilä, who briefed us on Basware’s new Financing Services. According to Tihilä, Basware launched the Basware Pay solution to counteract what it perceives as a culture of late payments in business. Suppliers can receive payment within as little as 24 hours after an invoice is approved in the Basware network, and Tihilä notes this can shrink a supplier’s days sales outstanding (DSO) and improve the business’s cash inflow. Once an invoice is approved by the buyer, payment can be made through Basware Pay via a unique Virtual Account Number provided by MasterCard. That single transaction then travels through the MasterCard payments network with funds settling in the supplier’s account. “The MasterCard technology is used because it’s global and we are able to use that same infrastructure everywhere in the world,” Tihilä said.
While this solution sounds like a traditional card payment solution, there may be a few wrinkles. Specifically, when we asked about user and supplier fees, Tihilä told us that Basware hadn’t publicly disclosed transaction fees yet, but that the fee structure would be very competitive. Besides, he said, “Our research tells us that the payments landscape doesn’t currently favor suppliers as Buyers have every incentive to push payment terms further out. This solution addresses both Buyer and Supplier cash requirements, letting Buyers pay later and Suppliers receive payment earlier.”
Additionally, the Basware CEO said that the Basware Pay solution will make the other two prongs of the company’s new Financing Services better and more accessible for third-party lenders because of the access to great data that will be provided by the Basware Commerce Network. “Unlike, for example, a pure dynamic discounting solution, Basware Financing Services are provided through the Basware Commerce Network,” Tihilä said. “As such, we are fully able to aggregate and leverage the data to ensure competitive financing for buyers and suppliers on the network.”
Tihilä said that this level of detail is critical for the financing parties, who provide the credit lines for buyers to use their Basware Pay account to finance their supply chain. The entire process will be very structured, according to Tihilä, which will make the Basware service flexible from both the buyer and supplier perspectives. For example, suppliers and buyers both can manage relationships through the Basware platform, either at a case-by-case invoice level or a global client level.
Tihilä sees the third-party financing component as an integral part of Basware Pay and the broader Basware Financing Services. Basware intends to pursue third-party banks and other funding sources, such as Arrowgrass Capital, who they recently signed an agreement with, to offer credit through Basware Pay. If an enterprise wants to finance their own accounts payable, then Tihilä suggested making use of Basware Discount, which—along with Basware Factoring—makes up the rest of the new Basware Financing Services business.
Final Thoughts
Basware Discount and Basware Factoring are slated to launch by the end of 2014. Basware Pay, on the other hand, is available now and—according to Tihilä—can be used to pay for everything from coffee to oil tankers.
Basware Pay is the latest offering in the red-hot payments space. We’ll be tracking it and following up to provide more details on the solution as they emerge. We’ll also be watching with interest as Basware unveils the rest of its Financing Services portfolio over the next few months.
Join the Ardent Partners LinkedIn group for all the latest discussions on B2B payments, commerce networks, and other financial operations topics.
